Nedbank and IT entrepreneurs in developing patent saga

It has recently been reported that two IT entrepreneurs from Gugulethu have made an application for an interdict to prevent Nedbank from using, that is, infringing, their invention protected by South African patent number 2016/05259 entitled “Method of and system for activating or deactivating a financial transaction card” (“the Patent”).  Various questions have been raised by the public regarding the validity of the Patent, such as, what protection the Patent affords the entrepreneurs and what the entrepreneurs would have to prove to show that Nedbank is indeed infringing the Patent and so forth. Knowing how fiery we South Africans can become when discussing such emotive topics around a braai or on social media, it is prudent to provide an overview of the law of patents as it pertains to the matter and based on publicly available information.  Please note that this article speaks to an action for the infringement of a patent which is to follow the application for an interdict and not to the application for an interdict itself.

Do software inventions qualify for patent protection?

The South African Patents Act (“the Act”) provides that a patent may be granted for any new invention which involves an inventive step and which is capable of being used or applied in trade, industry or agriculture. 

The Act does not provide a definition of “invention” and rather provides a list of subject matter which does not qualify as an “invention” for the purposes of the Act.  Here, among other things, the Act provides that a computer program shall not qualify as an “invention” for the purposes of the Act.  Importantly, however, the Act provides that only a computer program as such is not patentable. 

Therefore, a method or system that utilises a computer program to provide a certain result may be patentable.  Naturally the method or system would have to be new, involve an inventive step and be capable of being used in trade, industry or agriculture to qualify for patent protection.

What protection does the Patent afford the Gugulethu IT entrepreneurs?

A patent grants the patentee the right to exclude others from making, using, exercising, disposing of, offering to dispose of and importing the invention claimed in the relevant patent.

The Patent was granted and became open to public inspection on 30 August 2017 and a copy of this can be found online on the Companies and Intellectual Property Commission’s website. Whilst reading the Patent it is important to note that the protection afforded is delineated by its claims.  In particular, the so-called independent claims of the Patent define the broadest scope of protection afforded by the Patent.  The Patent has two independent claims, one directed towards a method and the other to a system.

As an illustration, the first independent claim of the Patent, claim 1, reads as follow:

A method of activating or deactivating a financial transaction card, and at least one account associated with the card, the method comprising:

  • receiving a request from a user or otherwise determining a need to activating or deactivating a card;
  • prompting the user to insert the user’s full name in a text field;
  • prompting the user to insert at least a portion of an identification number associated with the user;
  • prompting the user to insert a PIN number associated with the bank card, which is to be activated or deactivated;
  • prompting the user to select the account linked to the card, which is to be activated or deactivated;
  • comparing the provided information to information stored on a database; and
  • if the provided information is correct, or at least substantially correct, approving the request to activate or deactivate the relevant account/s and/or card.

What do the Gugulethu IT entrepreneurs have to prove to show that Nedbank is indeed infringing their Patent?

The onus rests on the Gugulethu IT entrepreneurs to establish a chain of evidence demonstrating that one or more of the acts of infringement as defined in the Act has, on a balance of probabilities, been perpetrated by Nedbank.

During any infringement proceedings, the court would have to ask itself “what would a person skilled in the art [technology to which the invention relates], on an integer-by-integer and purposive analysis of the claim, understand the forbidden field to be?”[1]

Therefore, Nedbank would only be infringing claim 1 of the Patent if its method of blocking a financial transaction card includes all of the essential integers of claim 1.  Importantly, infringement will still be found if Nedbank’s alleged infringing method includes all of the essential integers of claim 1 of the Patent, notwithstanding that the alleged infringing method includes additional essential integers.

What defences does an allegedly infringing party have against an infringement action?

One possible defence which an allegedly infringing party may have against an action for the infringement of a patent is that their product/method simply does not fall within the scope of protection of one of the claims of the alleged infringed patent.  As mentioned earlier, the claim of a patent would only be infringed if the product/method includes all the essential integers (i.e. characteristics) of said claim.

Any party being accused of patent infringement or otherwise may also elect to file a counterclaim against the infringement action for the revocation of the patent in question, based on any one or more of the grounds for revocation cited in the Act.  Currently, the South African Patent Office does not subject an application for a patent to substantive examination; i.e. the novel and inventive merit of the invention is not assessed before the grant of a patent application.  Therefore, if the allegedly infringing party can prove that the invention claimed in the relevant patent was not new and/or did not involve an inventive step at the date when the patent was filed, the patent will be liable to revocation.  If a patent is revoked, the effect is as if the patent never existed, and the proprietors of same would no longer enjoy any exclusionary patent protection under the patent.

Conclusion

The application for an interdict to prevent Nedbank from using, that is, infringing, the Gugulethu IT entrepreneurs’ patented invention is no doubt only the start of a developing saga.  Young entrepreneurs in particular are encouraged to follow this case earnestly to acquaint themselves with the law of patents and to thereby equip themselves with the knowledge on how to protect their own inventions.